PNOC Exploration Corporation, the upstream petroleum and coal arm of the state-owned Philippine National Oil Company has posted a 28% increase in its total equity amounting to PhP 6.75 billion in 2007, a modest improvement from the PhP 5.28 billion it posted in 2006. The increase can be attributed to the increase in retained earnings of PhP 1.45 billion. PNOC EC’s book value per share of its stocks also went up to PhP 3.37 in 2007 from PhP 2.64 in 2006. As a result of its remarkable performance, the company declared dividends amounting to PhP 200 million last December 11, 2007 to shareholders of record as of January 3, 2007.

PNOC EC’s gross revenue also went up from PhP 6.22 billion in 2006 to PhP 6.44 billion in 2007. The 4% growth was mainly due to two major factors: First is the increase in the volume of sales of the Malampaya gas from 105.85 billion cubic feet in 2006 to 125.05 billion cubic feet in 2007, coupled with the rise in gas prices from an average of US$ 6.93 giga joule in 2006 to US$ 7.15 per giga joule in 2007. Second is the increase in the volume of coal sold from 477.70 thousand metric tons in 2006 to 754.31 thousand metric tons in 2007 coupled with the rise in coal prices from an average of PhP 2,403.48 per metric ton in 2006 to PhP 2,767.51 per metric ton in 2007.

In 2007, the company also completed its adoption of the Successful Efforts Method of Accounting for its petroleum exploration and production activities wherein all exploration costs, except costs of exploratory wells are expensed and not capitalized as they are incurred. While the shift from Full Cost to Successful Efforts method was started in 2006, seismic data acquisition costs and other pre-drilling exploration costs incurred in prior years amounting to PhP 168.73 million were only charged in 2007.

“Cost Recovery” for SC-38 or the Malampaya Gas Project has reduced significantly in 2007. Cost Recovery is an incentive granted by the Department of Energy (DOE) to the contractors of Service Contract 38 to deduct certain “Approved Costs” up to a maximum of 70% of the monthly sales revenue before sharing the remainder Profit Petroleum with the Government – which includes the DOE, Bureau of Internal Revenue (BIR) and local government units. The decrease in Cost Recovery simply means that all pre-production costs in the Malampaya project has already been fully recovered, and the contractors are no longer entitled to take back as much amount from the gross revenue of SC-38 as Cost Recovery Funds.

The charging of pre-drilling costs of prior and current year as an expense of 2007, and the decrease in Cost Recovery for the Malampaya Project resulted in the decrease in net income of the company from PhP 2.6 billion in 2006 to PhP 1.77 billion in 2007.

This press release is not an offer of securities for sale in the United States or elsewhere. The shares of PNOC EC are not being registered under the US Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States unless registered under the Securities Act or pursuant to an exemption from such registration. There will be no public offering of the shares of the company in the United States.